Stock-specific moves likely in sideways trading

Indicating range-bound trading for the week ahead, the resistance level remained at 18,000CE for a second consecutive week, while the support level moved up by 200 points to 17,800PE. In terms of support, looking at Put writing positions, derivatives analysts expect limited downsides for NSE Nifty.

The short positions by FIIs remained high in the index Futures. Analysts forecast short covering deals this week and it may provide the required upsides to the index. Future premiums declined noticeably last week and with lower than usual premium, they expect some positive momentum to pick up in coming days.

The 18,000CE has the highest Call OI followed by 18,500/ 18,200/ 17,800/ 18,300/18,100 strikes. Further, 17,800/ 18,000/ 18,100/ 18,500/ 18,200 strikes recorded reasonable Call OI addition. Coming to the Put side, maximum Put OI is seen at 17,800PE followed by 17,700/ 17,600/ 17,000/ 17,200 strikes, while17, 500/ 17,900/ 17,500/ 17, 200/17,000 strikes witnessed modest to heavy build-up of Put OI.

Call writers were very active as Call bases were significantly higher than the Put bases. However, Friday saw some role reversal and heavy Put writing was seen at ATM Put strike of 17800. Hence, sustainability above 17800 should continue to propel the uptrend. We expect the Nifty to move towards 18200 levels.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, Nifty's highest Call Open Interest concentration was seen at 18,000 strike, followed by 18,200 strike. Whereas on Put side, the highest concentration in Open Interest held at 17,800 strike."

High premium in Nifty cooled down significantly over the last week as it's hovering near 20-25 points. And it's supporting the expected upsides.

"In the week gone by, Nifty and Bank Nifty closed flat to positive with marginal gains as stock-specific movement was seen in the market. Buying interest was seen in IT and midcap stocks, whereas selling pressure continued to mount on auto and metal stocks," added Bisht.

BSE Sensex closed the week ended February 10, 2023, at 60,682.70 points, a net fall of 159.18 points or 0.26 per cent, from the previous week's (Feb 3) closing of 60,841.88 points. NSE Nifty ended the week at 17,856.50 points, a miniscule decline of 2.45 points or 0.013 per cent, from 17,854.05 points a week ago.

Bisht forecasts: "Technically, Nifty has managed to close above its 20-day exponential moving average on weekly charts and is expected to remain in range as far prices hold below 18000-18050 zone. On the downside, 17700-17600 zone is likely to provide some support to the markets. We expect that in the upcoming week index is likely to remain in range, while stock-specific moves are likely to carry on."

Nifty Futures OI fell continuously and it was less than 10 million shares. Barring FIIs, remaining market players seem to be on the long side. The market already witnessed bouts of short covering from FIIs in the last few sessions. The net shorts, which were in excess of 1.1 lakh contracts have declined gradually to near 95000 contracts during the last week.

India VIX fell 2.26 per cent to 12.74 level. Also, the volatility declined significantly below 13 level suggesting optimism in the market after recent declines. Broader markets are likely to continue their outperformance in the coming sessions.

"Implied Volatility (IV) of Calls closed at 11.72 per cent, while that for Put options closed at 12.52 per cent. The Nifty VIX for the week closed at 13.04 per cent. PCR of OI for the week closed at 1.16 lower from previous week," remarked Bisht.

FIIs major activity was seen in the index Futures space as they bought over Rs1,600 crore. FIIs closed their short positions gradually during the week and their net shorts declined by almost 16000 contracts. FIIs also took net longs worth Rs1600 crore in stock Futures. FIIs turned net sellers as the index remained largely range bound. Domestic institutions compensated the FIIs selling by buying nearly Rs3800 crore.

Bank Nifty

NSE's banking index closed the week at 41,559.40 points, higher by 59.70 points or 1.43 per cent from the previous week's closing of 41,499.70 points.